Which trusts are exempt from the sufficiency funding requirement?

• A. Only pension trusts
• B. Only insurance trusts
• C. Pension and insurance trusts
• D. No trusts are exempt

Answer: (C)

Pension and insurance trusts are exempt because they operate under strong, regulated funding structures that already ensure funds are set aside and managed for their specific purposes. Pension plans fall under ERISA with mandatory funding rules, and insurance trusts are funded through insurance mechanisms and statutes. Because their funding is governed by separate regulatory requirements, applying the general sufficiency funding test to them would be duplicative or inappropriate.

So the exemption applies to both types of trusts, not just one, and not to none. Other trusts don’t have the same built-in, regulatory funding framework, so they remain subject to the sufficiency funding requirement.